Stocks gain after IBM OKs buyback
NEW YORK » Wall Street reversed earlier losses and rallied yesterday after IBM approved a $15 billion stock buyback, suggesting to investors that there are still some companies out there with financial muscle.
IBM Corp., one of the 30 companies that make up the Dow, said the buyback will boost its earnings for 2008 past Wall Street's prior forecasts. Shares of Big Blue vaulted $4.30, or 3.9 percent, to $114.38.
The buyback news followed two dismal economic reports.
The Conference Board's index of consumer confidence plunged in February to 75.0 from a revised 87.3 in January. The reading was the lowest since the index registered 64.8 in February 2003.
Meanwhile, the latest wholesale inflation report showed the headline producer price index rising by a full 1 percent in January.
The result was a bit below the 1.1 percent advance projected by Thomson/IFR, but core PPI -- which excludes food and energy prices -- rose 0.4 percent, steeper than the predicted 0.3 percent gain. The data was disconcerting because the Federal Reserve is known to closely monitor core-level inflation in setting monetary policy.
Cementing the belief that costs won't be easing anytime soon was oil's surge back above $100 a barrel. Light, sweet crude rose $1.65 to $100.88 a barrel on the New York Mercantile Exchange.
"The market is kind of overcoming negative news, which is potentially a next step toward higher prices," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "At least in the short term, it's a nice change here."
Yesterday's advance extended a rally that began Monday when Standard & Poor's affirmed the AAA ratings for troubled bond insurers Ambac Financial Group Inc. and MBIA Inc. MBIA, which yesterday said it would eliminate its quarterly dividend, was also affirmed by Moody's Investors Service.
The Dow rose 114.70, or 0.91 percent, to 12,684.92, after declining in earlier trading.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 9.49, or 0.69 percent, to 1,381.29, and the Nasdaq composite index rose 17.51, or 0.75 percent, to 2,344.99. The Russell 2000 index of smaller companies rose 6.86, or 0.97 percent, to 717.32.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 1.53 billion shares.
Government bonds rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.86 percent from 3.91 percent late Monday. The dollar was mixed against most other major currencies, while gold prices edged higher.
Target Corp., the discount store chain, said fourth-quarter profits fell due to poor holiday sales and a quirk in the earnings calendar, but results came in above the average forecast. Target rose $1.64, or 3.1 percent, to $54.89.
RadioShack Corp. rose after the electronics retailer posted a rise in fourth-quarter profit and higher sales than analysts predicted. RadioShack rose $3.30, or 21.5 percent, to $19.13.